The general education formula was developed in order to bring fairness in eduction funding across school districts independent of where they are located (property values, etc…) while also acknowledging that some schools will cost more to operate due to location and characteristics of the district. By only focusing on increasing one element of the formula, there is risk of making funding school districts unbalanced.
There are multiple ways in which legislators can change the general education revenue formula. However, it is typical that legislators will increase difference funding mechanisms by percentages. For example, the legislature can increase the basic education revenue by 4%. In FY22 that would mean the revenue would jump from 6728 to 6997.12.
One advantage of only increasing the basic education revenue component is that that component is linked to a few other components. For example, the declining enrollment component provides additional revenues for districts with decreasing enrollment by providing 28% of the basic education revenue value multiplied by the difference between FY22 and FY21 APUs. The components that are linked to the basic education revenue component are;
On the flip side of all this, the legislature could also choose other elements to adjust, such as increasing the gifted and talented revenue from $13 to $14 per APU.
I want to analyze what happens to total revenues for schools when focusing on one component vs. all components for increases. Therefore the following scenarios will be compared;
This will help us determine if some schools benefit way more by only focusing on one component for increases rather than the entire formula.
The following is a list of all the components and how each one was adjusted by 4%.
Basic education revenue
The basic education revenue category provides a base amount of revenue per adjusted pupil units to each school district.
A 4% would bring the revenue from $6,728 to $6,997.12.
Extended time
This program allows a school district to count a student who participates in extended programming for up to an additional 0.2 students in ADM for the time the student spends in summer school, etc…. The allowance is $5,117 X the district’s extended time adjusted pupil units.
A 4% increase would bring the revenue from $5,117 to $5,321.68.
Gifted and talented
A school district receives $13 per pupil unit for gifted and talented programming. $13 X adjusted pupil units. Must be spent on gifted and talented students.
A 4% increase would bring the revenue from $13 to $13.52.
Small schools
A school district that serves less than 960 pupil units is eligible for small schools revenue equal to $544 X the district’s adjusted pupil units, times the ratio of 960 less the district’s adjusted pupil units to 960.
A 4% increase would bring the revenue from $544 to $565.76.
In addition, a few schools received a dollar amount that wasn’t in the usual $544 x APU ratio due to having multiple schools in the district. A few of the schools in these districts qualified for small schools funding. Each of these were also increased.
Declining enrollment
Revenue equals the greater of zero or 28% of the formula allowance for that year and the difference between adjusted pupil units for the current year and the adjusted pupil units for the previous year.
A 4% increase would bring the revenue from $1,884 to $1,959.36.
Local optional aid
This revenue is meant to help equalize property rich schools districts and property poor school districts by providing extra aid to property poor districts. This is done by calculating the revenue, then the levy with equalizing factors, and then aid is distributed by subtracting the levy from the revenue.
Compensatory
Compensatory is a site-based revenue and at least 50% of the revenue must be distributed to qualifying programs at each site. The revenue must be used to meet the educational needs of pupils whose progress toward meeting state or local content or performance standards is below the level that is appropriate for learners of their age. This revenue must be put into a separate account. Revenue increases as the number of compensatory pupil units goes up, which is driven by the number of free and reduced price meals.
A pupil is counted as compensatory pupil if the pupil is eligible for free or reduced priced meals, which is set by the Federal government at 130% and 185 % of the federal poverty guidelines.
A 4% increase in this funding is linked to the basic education revenue so it would be $5,889 to $6,124.56. However, we were not provided the number of students that qualified for free or reduced lunch at each district but rather just given the total compensatory value for each school district. So in this case, we just increased the total dollar amount by 4%.
English learners
English learner revenue: a school district with at least one student eligible for EL services has a statutorily assigned minimum EL pupil count of 20. In addition, a district received more english learner revenue depending on the concentration of english learner students within the district.
A 4% increase for the basic EL revenue would go from $704 to $732.16.
A 4% increase for EL concentration revenue would go from $250 to $260.
Sparsity
This is a vertical funding mechanism meant to shore up support for school districts that serve small student population for an area not served by other schools. It acknowledges the challenges associated with the lack of economies of scale to providing education.
There are three parts to this revenue;
The two main components that can be changed are the following;
Operating Capital aid
Operating capital revenue must be reserved and used for equipment and facility needs. The computation is, the sum of $79 per pupil unit and the product of $109 per pupil unit and the district’s average building age index. The age index is called the maintenance cost index (MCI) and is calculated as follows;
Operating capital revenue is provided through an equalized aid and levy and is computed as follows;
The following adjustments were made for this scenario;
A 4% increase of $79 is $82.16.
A 4% increase of $109 is $113.36.
A 4% increase for the equalizing factor goes from $23,885 to $24,840.40.
Transportation sparsity
Transportation sparsity revenue provides revenue to school districts that have a relatively low ratio of pupils to the square mile area of the school district.
the primary change here is the increase in the basic education revenue.
A 4% would bring the revenue from $6,728 to $6,997.12.
Equity
Equity revenue is designed to provide additional revenue to districts with lower amounts of referendum revenue. Calculations for this revenue is broken into two regions - the 7-county metro and greater Minnesota. The formula consists of three parts.
Equity aid and levy: A district’s total equity revenue is equalized on referendum market value using an equalizing factor of $510,000.
The primary change in equity funding in this scenario is;
Transition
No changes were made to this revenue.
Pension adjustment
No changes were made to the pension adjustment.
Options adjustment
The change here was in the basic education revenue allotment.
A 4% increase goes from $6728 to $6,997.12.
Due to the basic education revenue component being linked to other components, it’s important to understand what changes.
The following is a list of the components that are impacted by a 4% increase to only the basic education revenue component.
Declining enrollment
Revenue equals the greater of zero or 28% of the formula allowance for that year and the difference between adjusted pupil units for the current year and the adjusted pupil units for the previous year.
A 4% increase would bring the revenue from $1,884 to $1,959.36.
Compensatory
Compensatory is a site-based revenue and at least 50% of the revenue must be distributed to qualifying programs at each site. The revenue must be used to meet the educational needs of pupils whose progress toward meeting state or local content or performance standards is below the level that is appropriate for learners of their age. This revenue must be put into a separate account. Revenue increases as the number of compensatory pupil units goes up, which is driven by the number of free and reduced price meals.
A pupil is counted as compensatory pupil if the pupil is eligible for free or reduced priced meals, which is set by the Federal government at 130% and 185 % of the federal poverty guidelines.
A 4% increase in this funding is linked to the basic education revenue so it would be $5,889 to $6,124.56. However, we were not provided the number of students that qualified for free or reduced lunch at each district but rather just given the total compensatory value for each school district. So in this case, we just increased the total dollar amount by 4%.
Sparsity
This is a vertical funding mechanism meant to shore up support for school districts that serve small student population for an area not served by other schools. It acknowledges the challenges associated with the lack of economies of scale to providing education.
There are three parts to this revenue;
The two main components that can be changed are the following;
Basic education revenue - $530: a 4% increase goes from $6,198.00 to $6,445.92.
Elementary sparsity revenue: the total revenue received by each school district was provided so we just multiplied the total elementary sparsity revenue provided by 4%.
Transportation sparsity
Transportation sparsity revenue provides revenue to school districts that have a relatively low ratio of pupils to the square mile area of the school district.
the primary change here is the increase in the basic education revenue.
A 4% would bring the revenue from $6,728 to $6,997.12.
Options adjustment
The change here was in the basic education revenue allotment.
A 4% increase goes from $6728 to $6,997.12.
Let’s do the same thing we did above, but instead of looking at scenarios in terms of how much it boosts revenue, let’s look at it as revenue per APU.
We will begin by summarizing total original revenue as well as the two scenarios per APU. The table below provides the total original revenue per APU, the 4% increase to the basic education component only per APU, and the 4% increase to the entire general education formula per APU, as well as the differences between these scenarios.
A 4% increase to only the basic education component equals a 3.75% increase to revenue per APU - from $7,843.19 per APU to $8,137.10. A 4% increase to the entire general education formula equals a 4.17% increase in total revenue per APU - from $7,843.19 per APU to $8,170.06 per APU. Essentially increasing the entire general education formula by 4% increases the total revenue per APU by nearly $33 compared to only increasing the basic education revenue component only.
Next, let’s take a look at the differences by charter vs. public, RUCA category, and regions.
The charter vs. public table shows that, surprisingly, charter schools receive significantly more revenue per APU than public schools. In the original FY22 revenue, charter schools receive nearly a $1,000 more per APU than public schools - $8,726.00 vs. $7,768.23 per APU. An increase of 4% to the basic education component only provides a larger boost to public schools than charter - 3.76% vs. 3.66%. A 4% increase to the entire formula also provides a larger boost to public than charter - 4.19% vs. 3.94%.
The RUCA table shows that entirely rural school districts receive the largest revenue per APU in the FY22 revenue formula - $8,902.93 vs. $7,752.59 per APU for entirely urban counties. That’s SIGNIFICANTLY larger. If only the basic education revenue component is increased by 4%, entirely urban schools receive the largest bump with 3.77% increase. It gets progressively less as a school district is more rural - 3.64% for entirely rural districts. However, a 4% increase to the entire general education formula means that entirely urban districts get the lowest bump - 4.13%. Then, entirely rural districts get a 4.19% bump, 4.23% for town/rural districts, and a 4.25% bump for urban/town/rural districts.
The planning region table shows that total revenue per APU is significantly closer to each other due to there being a mixture of rural and urban school districts within each planning region. In the original FY22 revenue, Northwest receives the highest with $8,121.39 per APU followed closely by Northeast. The lowest is actually Central with $7,643.96 per APU. The seven county metro receives the largest bump with a 4% increase to only the basic education component with a 3.77% increase. The lowest is Southwest with a 3.69%. By increasing the entire general education formula, Central and Southwest would receive a 4.27% increase followed closely by Southeast and Northwest. The Seven County metro would receive the lowest with a 4.11% increase.
The EDR table shows that EDR 1 and 2 receive the highest revenue per APU with between $8,500 and $9,000 per APU. This is followed closely by other rural EDRs such as 6W, 8, and 3. The lowest are EDRs located in Central MN - ER 9, 7E and 7W. With a 4% increase to only the basic education component, EDR 11 receives the highest bump with EDR 4 and EDRs in Central Minnesota following closely behind. The lowest bump is EDR 1, 6W, and 8. The EDRs with the highest bumps from a 4% increase to the entire general education formula would be EDR 6E, 8, 7E and 7W.
Now let’s see which counties receive the largest “boost” between the two scenarios. The map below shows that rural counties in SW and NW Minnesota receive the highest boost in dollars per APU by increasing the entire formula by 4% vs. only the basic education component. These counties receive $50 or more per APU by increasing the formula vs. the $40 or less of other counties.
The section above shows that there are significant differences in the amount of “boost” districts receive at an aggregated level between the two scenarios. Now let’s take a look at difference by not aggregating the districts. Rather, we will keep all revenues totaled at the district level, and analyze the districts that receive the highest boost (top 25%) and see if there are relationships between that 25% and their school type, RUCA category, and geography.
First, we will calculate each districts revenue increases from each scenario so we can determine which ones are in the top 25% highest. If you arrange it so that the districts with the largest gain from only increasing the basic education component by 4% vs. increasing the entire formula by 4%, there are a number of districts that gain above or nearly 1% in total revenue.
The summary stats of all the districts indicate a pretty normal distribution. The mean and medians for all scenarios are very close to each other with modest standard deviations.
Let’s take a look at each of these scenarios and the boosts given to each district. The maps below compare all of them.